Oil falls, Nigeria strike supports

By IBT Staff Reporter06/19/07 AT 2:55 PM

Oil prices eased on Tuesday, pulling back from a 10-month high posted in the previous session on concerns that a strike call in Nigeria could further cut crude output in the world's eighth-biggest oil exporter.

London Brent crude, currently a better indicator of the global market than U.S. oil, fell 14 cents to $72.04 a barrel by 1720 GMT. It touched an intraday peak of $72.25 on Monday, its highest since August 28.

U.S. crude gained 23 cents to $69.32, after rising $1.09 on Monday, the fourth session in a rally that has lifted prices by nearly $4.

A Nigerian union leader said an indefinite general strike -- including against the oil sector -- would go ahead Wednesday unless the government agreed to reverse in full an increase in the price of fuel.

At the moment, it's all about what's happening in Nigeria. The potential for a real strike there is helping prices up, said Andrew Harrington, an analyst from ANZ Bank in Australia.

The planned strike posed a challenge to newly inaugurated President Umaru Yar'Adua and comes after more violence flared in the oil-producing Niger Delta over the weekend.

Armed militants stormed two Western oil facilities in the Niger Delta in recent days, disrupting production. Militants have forced the shutdown of nearly a quarter of the nation's output of around 3 million barrels per day.

Analysts said other factors were also at play in oil markets, including a strike threat in Brazil that could cut output at state-run oil company Petrobras and concerns over fuel supplies in the United States, the world's top consumer.

U.S. gasoline continues to underpin crude prices as refiners struggle to keep up with strong demand across the driving season. And, finally, speculators on the NYMEX have increased net long positions, providing additional support, Citigroup said in a research note.

Analysts expect U.S. government data on oil inventories on Wednesday to show gasoline and distillate stocks rose last week as refinery operations recovered from unseasonably low level, according to a preliminary poll. Crude stocks were seen marginally higher.

CALL FOR MORE OIL

The head of the International Energy Agency, representing the interests of 26 consumer nations, urged the Organization of Petroleum Exporting Countries to raise production to increase oil supplies.

They need to increase output as soon as possible, Claude Mandil told Reuters.

Violence in the Gaza Strip also rattled traders, although analysts said there was little indication it would spill over to neighboring oil-producing countries.

U.S. crude hit a record high of $78.40 nearly a year ago on fears fighting between Israel and Lebanese Hezbollah guerrillas could spread to Middle East oil producers.

Iran, a member of OPEC, said it wants a price that preserves the producer group's market share and oil income.

Iran's OPEC governor said in remarks published on Tuesday that a price below $55 a barrel would hurt oil investment and above $75 would change consumers' energy policy.